Small change: after two decades, Belarus brings back its coins

Belarusians haven't had a coin in their pocket since kopeks went out of circulation two decades ago under the pressure of the country's chronically double-digit inflation.

But small change returns on July 1 as part of a currency redenomination that is slicing four zeros off the Belarusian ruble, albeit with no indication that policymakers in Minsk can boost the country's struggling economy or shore up the new rate.

What in June has cost 21,700 rubles, the equivalent of $1, will next month cost 2 rubles and 17 kopeks, supersizing the currency despite Belarus's shrinking GDP and continued inflation of around 12 percent.

Belarusian vendors will be among the first to see the change, and they are far from happy. The redenomination will make money easier to handle, but for decades cash registers in Belarus have been designed to tally up only banknotes. They don't even include decimal points for kopeks.

There are at least 23,000 cash registers in Belarus that cannot work with decimals and will have to be totally replaced, says Anatol Shumchanka, a Minsk entrepreneur who also heads Perspektiva, a nationwide association of private vendors. He says replacing those obsolete machines will cost $100 apiece, or more than $2 million.

Shumchanka says he won't have to replace his own machines. His models, like most of the quarter-million or so cash registers in this country of under 10 million people wedged between Russia and Poland, can be reprogrammed by technicians to accommodate decimals. The reconfiguring is estimated at around $30 per machine.

"That will require additional expenses: We will have to relicense [the cash registers], prepare documents, in other words start everything from the very beginning," he says, adding that most of the cash registers are in the hands of private entrepreneurs who will have to absorb the costs themselves.

Add that to a long list of complaints private vendors have in Belarus, one of Europe's poorest countries and one routinely described in the West as ruled by the continent's "last dictator." Here, President Alyaksandr Lukashenka governs over a heavily state-dominated economy that has changed little since the collapse of the Soviet Union in 1991 and is so mismanaged that this will be the third time he has redenominated the currency since coming to office in 1995.

Both times previously, inflation rapidly returned. But now, in an apparent show of rolling it back for good, he has gone beyond simply issuing new banknotes and added coins as well, giving the currency the look it had the last time Belarusians enjoyed economic stability -- during the Soviet era.

In the run-up to July 1, Belarusian President Alyaksandr Lukashenka has repeatedly tried to drum up public enthusiasm for the incoming new rubles and kopeks.

In the run-up to July 1, the president has repeatedly tried to drum up public enthusiasm for the incoming new rubles and kopeks. "People are waiting for this redenomination," he said on June 16, adding that it should "contribute to the efficiency of the national economy." The new money is to circulate in parallel with the existing ruble bills until the end of this year, when the old bills will be retired.

But many independent Belarusian economists are skeptical that much will change so long as the country's inflation rate runs in the double digits.

"With the existing inflation rate, kopeks will lose their sense very quickly," says Yaraslau Ramanchuk, a financial expert with the Mizas Foundation, a Minsk NGO. The new coins, minted in Slovakia and Lithuania, come in denominations from one kopek up to two rubles.

Ramanchuk sees the return of the coins as having to do far more with symbolism than economics. "It's an operation to distract people's attention, saying, 'OK, we have our kopeks back, let's be proud of our kopeks,'" he says, "'and later we will probably create another symbol in two years.'"

Symbolism Over Economics

In Lukashenka's Belarus, the symbols usually appeal to popular nostalgia for the Soviet Union, which dissolved in 1991 but still represents a relatively prosperous time for most citizens. The president, who stays in power through a mix of populism and jailing of opponents, has already reintroduced the Soviet Belarusian Republic's old flag and state seal as the new flag and state seal of independent Belarus. The state seal -- replete with red star -- will appear on the obverse of the new kopeks, making them easy to mistake at first glance with their Soviet-era counterparts.

On the streets of Minsk, the redenomination is bringing out ordinary Belarusians' staple defenses of resignation and humor as they try to make do in a state-run economy that produces shortages of everything, offers little room for a private sector, and directly benefits only a small ruling elite.

"There were so many changes during my lifetime that I do not care anymore," one Minsk resident told RFE/RL's Belarus Service when asked what she thought of the new currency. Like many Belarusians, she preferred not to give her name for publication.

"I am satisfied that at last we will have normal wallets," a middle-aged man quipped. "Not wallets where, when you open them, you see millions in there."

International financial experts say Belarus's redenomination follows the well-worn practice among countries with weak currencies of lopping off zeros in an effort to win back public confidence in their money at home and abroad.

"You can have a sentimental effect that can lead to some positive changes in terms of spending and investment and how people perceive the economy," says Chris Weafer, a financial expert with Moscow-based Macro Advisory, a consulting firm for investors that specializes in the former Soviet republics. "But [Belarus] has bigger issues to deal with before we can start talking about any return to sustainable growth or any increase in foreign investment."

He notes that last year the economy shrank by almost 4 percent and predicts that hardship will continue this year with a contraction of 2 percent.

One of Belarus's biggest problems is its high dependence on Moscow for subsidies in the form of energy and low-interest loans, tying it closely to Russia's economy. Another is the lack of incentives for entrepreneurs within its state-dominated economy, something that has contributed to a steady brain drain of talented people to Russia, Germany, and the United States.